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Web products have followed a steady evolutionary path from the
compound to the atomic. Today’s popular social sites are spin
outs of behaviors that emerged from blogs and forums, the
primordial soup of the early social web. Before there was
Twitter, people were doing something similar to tweeting on
so-called link blogs or micro blogs. Tumblr was a direct
descendent of a particular strain of blogs known as tumble blogs.

The successful products took big meals and converted them to
snacks. The Internet likes snacks – simple, focused products that
capture an atomic behavior and become compound only by linking in
and out to other services. This has become even more so with the
shift to mobile. People check their phones frequently, in short
bursts, looking for nuggets of information.

A notable exception to this pattern are online products that
users pay for. The dominant payment systems (mainly, credit card
systems) were designed to be offline systems and only much later
awkwardly grafted onto the Internet. They are inefficient and
prone to fraud. As a result, paying online means making a
commitment of time and trust. That’s why one of the most valuable
assets an online business can have is “credit cards on file”. It
is also one of the reasons there is a rich-get-richer dynamic for
paid products. Big companies like Amazon and Apple are the
beneficiaries.

The perverse result of this system is that products that are
naturally suited to be “paid snacks” have to contort themselves
to make money. News and music are good examples. Only a few news
sites are popular enough to entice users to commit to paying, and
even those have had only limited success with paywalls. Other
news sites depend on intrusive ads to support themselves. Music
is mainly purchased through aggregators like iTunes and Spotify
who charge a hefty tariff. You need a comprehensive catalog to
convince users to commit to a payment relationship.

In-app payments on iOS and Android are the one place where paid
snacks exist at scale. They have been wildly successful, quickly
becoming the dominant business model for games, replacing
up-front payments and banner ads. (There are individual games
that generate over one billion dollars per year from in-app
payments.) Outside of games, entrepreneurs have started building
interesting new products that wouldn’t have been viable without
in-app payments.

This is one of the main reasons people are excited about new
payment systems like Bitcoin. A broadly adopted form of
“programmable money” has the potential to bring paid snacking to
the rest of the Internet, and in doing so enable the save level
of innovation in paid products that we’ve seen in the free and
ad-supported products.